Utmost Good Faith

Question 1

The principle of Utmost Good Faith links to what case law and what act?

Answer 1

Carter v Boehm (1766) and the Marine Insurance Act 1906

Question 2

Carter v Boehm (1766) and the Marine Insurance Act 1906, in summary established the PH’s duty of utmost good faith to:

Answer 2

1. Disclose all material facts to UW’s, whether or not PH has been asked to disclose such facts and
2. Make sure that every material representation they make to insurers before the insurance contract entered into is true

Question 3

Who has a duty to Utmost good faith?

Answer 3

Both PH’s and Insurers.

Question 4

When did the Consumer Insurance (Disclosure and Representations) Act 2012 come into force?

Answer 4

6th April 2013

Question 5

What did the Consumer Insurance (Disclosure and Representations) Act 2012 influence?

Answer 5

1. Modified principle of Utmost Good Faith
2. Removed duty on consumers to disclose material facts that a prudent UW would take into account when calculating premium or policy terms
3. Replaced this duty with the duty of taking reasonable care not to make a misrepresentation

Question 6

From the Consumer Insurance (Disclosure and Representations) Act 2012, what is the test regarding misrepresentation of the risk?

Answer 6

1. Whether the misrepresentations made are careless, reckless or deliberate - Insurer has right to impost penalties
2. If misrepresentation doesn’t fall under careless, reckless or deliberate, Insurer has no rights to restrict or reject payment in event of claim even if they consider the misrepresentation to be material.

Question 7

What other factor should be taken into account when determining whether or not a consumer has taken reasonable care?

Answer 7

Whether or not the questions asked of them at policy inception were clear and specific.

Question 8

Caveat Empour?

Answer 8

Let buyer beware